Legal Forms of Business
Legal Forms of Business
LAW/531 Business Law
March 4, 2013
Dr. Linda Fried
Legal Forms of Business Businesses exist and managed in many of the same ways. However, there are many formats that businesses are operated in. From sole proprietorship to different partnerships to corporations, each form has many similarities, but they are very different types of businesses. Each business entity will vary on three primary factors: liability, taxation and record-keeping (Entrepreneur, n.d.). Let’s review each format and some sample businesses operating under each type of format.
Sole Proprietorship According to the SBA (n.d.), a sole proprietorship is the simplest and most common structure chosen to start a business. Sole proprietorship consists of one owner who assumes all personal liability for the business. This means that the debts of the business are also debts of the owner. Many barbers operate under a sole proprietorship. If he or she wants to operate their barbershop under a different name, they must file the appropriate paperwork in the county of their business.
Partnership
When two or more people want to operate a business together, they may form a partnership. It is a good idea to create a partnership agreement that will entail how future business decisions will be made, including how the partners will divide profits, resolve disputes, change ownership, or even dissolve the business (SBA, n.d.). A partnership can be a general partnership, limited partnership, or a limited liability partnership.
General Partnership General partnership means that all owners equally share in the management of the business which includes the profits and loses. The percentage of ownership for each partner can be different but must be documented in the partnership agreement. A type of business that may establish a general partnership is a carpet cleaning business.
Limited Partnership When there is one general partner and one limited partner, the
LAW/531 Business Law
March 4, 2013
Dr. Linda Fried
Legal Forms of Business Businesses exist and managed in many of the same ways. However, there are many formats that businesses are operated in. From sole proprietorship to different partnerships to corporations, each form has many similarities, but they are very different types of businesses. Each business entity will vary on three primary factors: liability, taxation and record-keeping (Entrepreneur, n.d.). Let’s review each format and some sample businesses operating under each type of format.
Sole Proprietorship According to the SBA (n.d.), a sole proprietorship is the simplest and most common structure chosen to start a business. Sole proprietorship consists of one owner who assumes all personal liability for the business. This means that the debts of the business are also debts of the owner. Many barbers operate under a sole proprietorship. If he or she wants to operate their barbershop under a different name, they must file the appropriate paperwork in the county of their business.
Partnership
When two or more people want to operate a business together, they may form a partnership. It is a good idea to create a partnership agreement that will entail how future business decisions will be made, including how the partners will divide profits, resolve disputes, change ownership, or even dissolve the business (SBA, n.d.). A partnership can be a general partnership, limited partnership, or a limited liability partnership.
General Partnership General partnership means that all owners equally share in the management of the business which includes the profits and loses. The percentage of ownership for each partner can be different but must be documented in the partnership agreement. A type of business that may establish a general partnership is a carpet cleaning business.
Limited Partnership When there is one general partner and one limited partner, the
References: Ca.gov. (2013). California Tax Center – Limited Partnerships. Retrieved from http://www.taxes.ca.gov/Income_Tax/limitedpartbus.shtml. Entrepreneur.com. (n.d.). Choose Your Business Structure. Retrieved from http://www.entrepreneur.com/article/38822#. Pakroo, P. (2013). Limited Partnerships and Limited Liability Partnerships. In NOLO. Retrieved from http://www.nolo.com. Sba.gov (n.d.). Choose Your Business Structure. Retrieved from http://www.sba.gov/content/.